Reality bites at Flower St

MediaWorks has increased local content budget but is cutting costs in other areas. Photo / Dean Purcell

Deep in the bowels of a former milk processing factory on Auckland's Flower St, workers gather around the photocopier engaging in age-old office grumbling. Printing in colour is strictly monitored. One half-jokes that attempts to break out of black and white requires a business case.

To further save money most staff are required to print double-side - the option to select single-sided printing has been disabled. This has led to laborious work-arounds worthy of The Office: One worker explains he breaks his printing into multiple requests, each of only a single page.

"It takes ages, and it's pretty f***ing annoying, but it's worth it," says the MediaWorks employee of his quest to use both sides of the paper.

This cost-saving measure is only the most banal manifestation of a recent squeeze on finances at broadcaster MediaWorks, particularly its television arm. More substantively, departing staff are not being automatically replaced, and instead business cases are made arguing the case for a rehire to a management committee that meets once a month.

Chief executive Mark Weldon says questions over the company's nickel-and-diming printing strategy are "fair". He concedes savings on ink and paper will, in the scheme of things, only be marginal, but the gesture is important.

"These things have some symbolic aspect - when people start focusing on things everyone notices you are sending a signal that people expect fiscal responsibility in all things," he says.

Outside the company's Flower St headquarters, the squeeze is also being felt by advertisers and commercial partners. This pressure is understood to have ruptured the decade-long relationship between MediaWorks and ASB in August when the fee for sponsoring the business news was increased - despite ratings for the news hour having significantly decreased.

Interviews with nearly a dozen current and former staff and executives at the company have told a consistent story of a company with a split personality. While the radio side of the business has been performing well, television is treading water after expensive gambles to revamp the broadcast schedule have yet to pay off.

These gambles, on Paul Henry, on reality television, on cross-promoted content and cross-platform advertising sales, is part of a new broom approach led by chief executive and former stock exchange boss Mark Weldon and a board appointed by the company's former bankers.

The strategy, understood to have had significant input from director Julie Christie, who occupied the office of Paul Maher when the former MediaWorks TV boss left the company in December, has come at some cost.

Multiple sources say MediaWorks' annual local content budget has nearly tripled under the new strategy. This explosion in costs can be partly explained by the launch of a number of new current affairs shows (Story, Newsworthy, Paul Henry), but is mostly attributed to the ambitious double-or-nothing reality television strategy that brought the country X-Factor, The Block NZ, Dancing with the Stars, MasterChef NZ and more.

Weldon in the past has said this strategy displaced some spending on other programming, chiefly foreign-produced shows, that would otherwise screen in these prime time slots. He says his company is evolving and the process of transformation is still a few years from being completed and will have some misses to go with hits.

"2015 is a year in transition. We're trying a few things, some will work - but not all do," he says.

As to what is or isn't working, and to what extent, he tells the Weekend Herald that he isn't interested in playing numbers games and draws the veil of corporate privacy. "We're a private company, and we're owned by private equity investors, who are very private. I'm not prepared to discuss the financial performance of the company in public," he says.

As such, he won't be drawn on suggestions from multiple sources that the increase in costs, and a parallel decline in advertising revenue, has savaged earnings for the television arm.

(Last month, the Australian Financial Review, citing unnamed sources, said a slump in the television business was the chief culprit behind what is expected to be a significant decline in MediaWorks' earnings for 2015.)

Chief executive Mark Weldon says MediaWorks is evolving. Photo / Chris Gorman

Weldon stresses the division between the television, radio and online part of the business was becoming less distinct and performance needed to be measured across the whole. He also drew attention to the cross-platform opportunities presented by the reality strategy - citing the new profile of Dancing with the Stars winner, and MediaWorks radio host, Simon Barnett.

Meanwhile, the company's chief financial officer, David Chalmers, said in a statement it was "no secret" free-to-air television was living in interesting times. He suggested the New Zealand market for broadcast advertising declined $60m over the past year, acknowledging that TV3 and Four weren't immune from this industry-wide malaise.

Chalmers sought to accentuate the positive, pointing to the radio division which the Weekend Herald understands is on track to keep earnings steady this year. "Converse to the TV business, many parts of MediaWorks are doing extremely well," Chalmers said.

Weldon insists he's staying the course, and notes he inherited a do-up. "This was a business that was burdened with too much debt, and it really stood still in terms of investment in technology... : And during that time the media market moved away from the television business."

The market, certainly the advertising market, appears to have moved away rapidly. According to MediaWorks' commercial ratecards, measuring the headline price for 30-second advertising spots, TV3's primetime revenue is down by almost a third since August 2014.

For instance, a spot during a Monday night episode of The Block NZ which screened in August 2014 was listed as being worth $16,660. That same Monday slot a year later, during reality show Masterchef NZ, was listed as $13000. Monday's latest edition of The Block NZ was selling spots for just $11,900.

Weldon says ratecards are an "antiquated structure" that shouldn't be relied on too heavily. "The rate card is sort of a joke: We are working with the industry on moving away from it," he says.

Part of this decline in prime time slump can be attributed to MediaWorks' news division, which is clearly losing the battle for ratings with rivals TVNZ.

"The news has not been performing, and that's a continuation of a long-term trend," Weldon says.

Consultants Deloitte were brought in recently to review that part of the business, and a decision on restructuring of the newsroom was announced yesterday.

It's unlikely to see single-sided photocopying privileges reinstated anytime soon.